The U.S. dollar saw a modest rise at the start of the week, holding steady as markets await a batch of economic data that was delayed due to the recent government shutdown. This calm movement comes ahead of the Federal Reserve’s final meeting of the year, which investors are closely watching for clues on the future path of interest rates.
The dollar index recorded a slight increase to 99.282 during the morning session, recovering part of last week’s losses. Market focus is now centered on the delayed data most notably the September non farm payrolls report, scheduled for release on Thursday.
The end of the shutdown is allowing economic data to flow again, giving both investors and the Fed a clearer picture of the economy. According to ING’s estimates, the probability of a rate cut in December has risen to nearly 50%, which may limit the dollar’s reaction to Wednesday’s Fed minutes and give more weight to the jobs report.
Markets this week will also hear from several Federal Reserve officials, whose remarks may offer additional insight into policy direction. ING notes that continued Fed signals of patience regarding rate cuts combined with uncertainty over the level of the neutral rate could offer relative support to the dollar.
The EUR/USD pair slipped to 1.1601 after reaching a two week high last week. Focus in the eurozone now turns to the flash November PMI data, which in recent months has shown businesses adapting to global volatility. ING analysts expect buying interest to emerge if the euro declines toward the 1.1560 1.1580 range.
The GBP/USD pair edged down to 1.3162, with volatility easing after U.K. Finance Minister Rachel Reeves reiterated that income tax would not be raised. Still, fiscal challenges remain, with the government needing to find tens of billions for the November budget.
The USD/JPY pair rose to 154.68 after data showed Japan’s economy contracted 1.8% annually in the third quarter slightly better than expected but still reflecting a clear slowdown. Exports weakened under pressure from new U.S. tariffs, and consumption remained soft due to inflationary pressures. On a positive note, capital spending improved, indicating that businesses are still maintaining investment activity despite challenges.
In Asia, the USD/CNY pair climbed to 7.1045, while the Australian dollar posted a slight rise to 0.6534, amid generally calm trading conditions.
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